Trade Credit Market Update April 2025

Authored by Peter Ghaleb, National manager - Trade Credit Insurance

Challenging Conditions Continue in 2025

Business insolvencies across Australia continue to rise, with some sectors facing significantly more pressure than others. The latest data from ASIC reveals the top 10 industries hit hardest by insolvency this financial year, and how those rankings have shifted since last year. Construction once again tops the list, but notable surges in industries like Accommodation & Food Services and Professional, Scientific & Technical Services, hint at broader economic stress. We've broken down the numbers, key trends, and warning signs that suppliers and partners should be watching closely.

Top 10 Industries for Insolvencies (FY 2024-2025 vs FY 2023-2024)

Rank	Movement	Industry	No. of Insolvencies 24-25	% Change since last FY
1	-	Construction	2,476	-16.83%
2	-	Accommodation & Food Services	1,704	+2.16%
3	-	Other Services	1,043	+0.29%
4	▲	Professional, Scientific and Technical Services	684	+4.27%
5	▼	Retail Trade	587	-23.57
6	▲	Administrative & Support Services	532	-2.74%
7	▲	Transport Postal and Warehousing	483	-2.42%
8	▼	Manufacturing	447	-22.66%
9	-	Rental Hiring & Real Estate Services	385	-3.02%
10	-	Financial & Insurance Services	317	+2.26%

Although some industries appear to be performing better than last year, it's important to remember that there are still three months remaining in the 2025 financial year. As such, it's too early to determine if this trend will hold. Even if certain sectors improve, the broader picture remains concerning - company insolvencies in Australia have already surpassed last year's levels.

According to ASIC, over 10,000 external administration and controller appointments occurred in the first nine months of the 2024-25 financial year (July to March), putting Australia on track to exceed 15,000 insolvencies for the full year. This would mark the highest annual level in more than a decade, representing a significant rise compared to the 11,053 total appointments recorded in 2023-24¹.

What's driving these trends?

Construction still tops the list but saw a notable decline in insolvency numbers (nearly -17%). This may reflect a cleansing of weaker players during prior economic stress, leaving behind slightly more resilient operators. However, cash flow challenges and project delays remain key risks.

Retail and Manufacturing saw the largest drops in insolvency numbers, potentially reflecting a recovery in consumer spending and supply chain stability. Retail businesses made use of a dismal 2024 to optimise costs, introduce new marketing strategies, and increase efficiencies in their operations². Manufacturers benefitted from more reliable access to materials and components thanks to their heavy investing in 2022 in expanding their global footprint³.

Professional, Scientific and Technical Services showed the biggest increase, possibly due to rising overheads, delayed payments, and shrinking client bases amid economic uncertainty.

Red flags to spot in the sectors most at risk

The top three hardest-hit industries this financial year are each facing unique challenges, but common themes like rising costs, cash flow pressure, tax debts and shifting consumer behaviour are proving especially difficult to manage. To help protect your business, it's crucial to know the key red flags to identify when a business may be heading into trouble. Here is a closer look at the sectors under the most strain and the warning signs you shouldn't ignore.

Construction

Current Key Issues: Fixed-price contracts, delayed payments, cost blowouts (materials/labour), and contractor insolvencies up the supply chain.

Red flags:

Repeated project delays
Sudden changes in subcontractors or suppliers
Late or partial payments

Accommodation and Food Services

Current Key Issues: Increased operating costs, seasonality, tight margins, and softened consumer demand due to economic pressures.

Red flags:

Frequent changes in business hours
Increased online negative reviews citing service/staff shortages
Discounts or promotions that seem excessive or desperate
Late supplier payments

Retail Trade

Current Key Issues: Consumer spending fatigue, increased operating costs, and online competition.

Red flags:

Low or outdated stock
Sudden store closures or relocations
Heavily reduced pricing
Delayed supplier re-orders

Professional, Scientific and Technical Services Insolvencies on the Rise for 2025

Insolvencies within the Professional, Scientific and Technical Services sector have seen a significant increase this year, driven by a combination of economic pressures and sector-specific challenges. For many businesses in this category, cash flow problems are becoming more prevalent as clients delay payments or reduce spending on consultancy services. The sector's heavy reliance on project-based work also makes it vulnerable to sudden changes in client budgets or project cancellations, further exacerbating financial instability.

The Australian Tech industry, in particular, is experiencing a skills shortage, making it challenging for companies to meet demand and pushing up wages. As well, early seed funding for startups has slowed significantly since 2021⁵, making those more reliant on capital more likely to struggle.

Demand for professional consulting services fell sharply last year, hitting strategy and HR experts the hardest. The sector has been particularly affected by local scandals among the big four firms, and tighter consumer spending⁶, leading businesses to cut back on investing in big projects and making use of in-house resources.

Red flags to look out for in the Professional, Scientific and Technical Services sector:

Frequent late payments, requesting extended payment terms, or asking for discounts
Sudden cancellations, downsizing, or reduced frequency of orders
Reluctance to accept price increases or pushing back on contracts with minimal negotiation
High staff turnover or lack of communication
Excessive order of inventory without clear reason

The outlook for the rest of FY2025

Recently, the outlook for Australia's economy has improved, partly due to the positive effects of income tax cuts that begun to take effect in mid-2024. Additionally, the Reserve Bank of Australia's decision to lower interest rates in February is expected to further bolster economic conditions in the coming months.

However, businesses are still grappling with persistent cost pressures and accumulated tax debts. At the same time, global trade uncertainties could create more challenges, potentially dampening business confidence, share prices, and employment.

While Australia does not rely heavily on exports to the U.S., the indirect effects of tariff policies, such as weaker global growth, lower share prices, and potential job losses, could have a significant impact on the Australian economy and cause disruption beyond direct trade channels⁷.

Despite some positive outlooks, the challenges faced by Australian businesses are unlikely to ease anytime soon. While inflation is gradually returning to more typical levels, this doesn't necessarily mean the cost of living or operating a business will decrease. In fact, if inflation is maintained at 2.5% through 2026, the core consumer price index will have risen by 25% over six years - a figure that would strain even the most resilient of businesses⁸.

The importance of Trade Credit Insurance in today's business environment

The current business environment is marked by persistent and significant challenges which are contributing to insolvencies across multiple sectors. In this volatile climate, trade credit insurance, also known as debtor insurance, has emerged as one of the most effective ways for businesses to safeguard themselves against the financial risks of customer insolvencies. By protecting against non-payment, trade credit insurance provides peace of mind, allowing businesses to continue their operations without the looming threat of unpaid invoices. Unfortunately, as insolvencies continue to rise, businesses of all types must be proactive in securing financial protections to withstand these uncertain times.

Coverforce are one of the few specialist insurance brokers in Australia who have an experienced, in-house Trade Credit team. We provide tailored insurance solutions at competitive rates for businesses both in Australia and overseas. Learn more about our Trade Credit and Debtor Insurance Solutions here

REFERENCES:

https://asic.gov.au/regulatory-resources/find-a-document/statistics/insolvency-statistics/#s1-2
https://assets.kpmg.com/content/dam/kpmg/au/pdf/2025/australian-retail-outlook-2025.pdf
https://www.afr.com/policy/economy/four-ways-australia-can-lift-investment-in-manufacturing-20240409-p5fieg
https://smallbusinessconnections.com.au/australias-tech-talent-shortage-problem/
https://techcouncil.com.au/wp-content/uploads/TCA-Southstart-Report-The-state-of-Australias-tech-ecosystem-March-2024.pdf
https://www.afr.com/companies/professional-services/consultants-face-decade-low-growth-slump-20240628-p5jpm9
https://creditorwatch.com.au/blog/record-high-hospitality-closures-in-past-year-key-measure-of-business-stress-leaps-47-year-on-year
https://creditorwatch.com.au/blog/challenging-conditions-to-continue-with-the-trump-factor-the-big-unknown

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